First Half Results 2015: Meliá Triples Net Profit Thanks To Significant Progress In Revenues, EBITDA And Revpar And Consolidates The Recovery Of Profit Margins
- Net profit reached 20.3 million euros, 224% more than in the first half of 2014
- Notable growth in profit margins throughout the business (+323 basic points)
- Total revenue up by 19.2% to 839 million€
- 19 consecutive quarters reporting RevPAR’s growth
- Improvement in Global RevPAR of +11.5% based mostly on price increases in all regions, with Spanish cities at the head (+12%)
- Underlying EBITDA improved by 22.1%, 43% if capital gains from asset sales are included
- Meliá.com continues its persistent upward trend, increasing sales by 27% to date
- Financial results improved by 45% over the first half of 2015 thanks to the debt reduction and the lower financial costs
- Net debt reduced by 118.2 million€ compared to December 2014
- Objective achieved to maintain net debt to underlying EBITDA ratio below 3.5X
- From January to June share price increased by 33%
- The company signed 14 new projects and there are 61 hotels currently in the pipeline
- 9 hotels were opened between January and June, including the spectacular Meliá Doha, ME Milan Il Duca and Meliá Paris La Defense
- Expansion through low capital-intensive formulas (100% of the additions in the period) confirms the company focus on a management business model
- The company continues to add projects in Cuba with the signing of a new Meliá hotel in Varadero
Outlook for the year
- Positive outlook for Spain and Europe, with the favourable impact of the appreciation of the dollar and pound sterling
- Figures predict a good summer season, above 2014
- Notable developments in the company’s Spanish city hotels, especially in Madrid and Seville
- Maintains guidance of healthy single-digit growth in RevPAR for the full year 2015
Gabriel Escarrer, Vice Chairman and CEO of Meliá Hotels International: “The results from January to June confirm the positive business performance of our international hotel company, and together with our strength in the Caribbean, reflect the fruits of economic recovery and our successful sales strategy in major European cities, especially in Spain. Looking ahead, our company is working on a new Strategic Plan 2016-2018 which will allow us to continue to lead a constantly changing industry, both in the resort and new “urban resort” areas, and to continue to make progress in the company’s digitalisation.”
Meliá Hotels International today announced excellent results for the first half of 2015. In particular, the company highlights positive growth in the main European and American feeder markets and verifies the recovery of the Spanish market. Along with this positive situation and the favourable effect of the appreciation of the dollar and the pound sterling, Meliá attributes the positive developments to the company’s strategic focus on revenue, direct sales and customer loyalty (Melia Rewards programme) together with hotel renovations and rebranding.
The company earned 20.3 million euros in the first half of the year, a 224% increase compared to the same period in 2014, with growth of 19% in total revenue and 22.1% in underlying EBITDA, which increased by 43% if the greater capital gains from asset sales during the period are included.
Once again, of note is the growth in sales at melia.com (+27% to date) powered by the increasing digitalisation of the business through the “MeliaDigital” project, with melia.com now the company’s most important sales channels while also being the perfect complement to the business generated through close cooperation with the most important travel agencies and tour operators.
In particular, the company welcomes a strong recovery in profit margins, which, with overall growth of 323 basic points, improved in all business areas, and the reduction of net debt, which will allow the company to meet its financial deleverage objective and continue to alleviate financial costs. Financial results improved by 45% and free cash flow grew by 30 million euros compared to the first half of 2014.
Reinforcing the company’s strong international growth, Meliá highlighted the important rate of new hotel openings (9 added so far in 2015 and 14 new hotels signed in the same period for future addition). The company’s portfolio currently totals 377 hotels (with nearly 98,000 rooms), of which 316 are currently operating and 61 are signed and in the process of opening. The company highlights its continued growth in Cuba, where it expects to have 15,000 rooms in operation by 2018.
Improvements in all divisions
The Americassaw excellent RevPAR growth of 30% excluding the impact of the change to SIMADI exchange rate of the Venezuelan Bolivar, thanks to the positive performance of the business and also partly due to the appreciation of the Dollar against the Euro. Also of note was the growth of sales through melia.com which under the company’s “MeliáDigital” project increased by 36% compared to 2014.
By country, Mexico continues to do well with RevPAR growth of 34.6% thanks to the persistent growth of Paradisus de Playa del Carmen, Paradisus La Perla and Paradisus La Esmeralda, and the improvement at the Paradisus Cancun. The resorts in the Dominican Republic also saw a significant improvement (+28.2%) in RevPAR, 95% of which is due to price increases. Also of note is the successful management of direct sales and US online travel agency sales to offset the collapse of the outbound Russian market.
Finally, there are noteworthy developments at the Melia Nassau in the Bahamas, a managed hotel that has doubled its results compared to last year after a major renovation and conversion to an all inclusive resort.
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The region recorded healthy growth of 7.8% in RevPAR thanks entirely to price increases, which included an improvement of 7.1% in revenues of hotels in Germany, especially Berlin which benefited from the hosting of the Champions League football final, and other hotels that continue to perform well, such as the Innside Wolfsburg and the Tryp Munich. Also of note is the 100% growth of outbound sales of German customers to company hotels in other regions.
Paris saw an excellent performance from the new Meliá Paris La Défense, well positioned only a few months after opening, and consistent price improvements in its other hotels. Italy saw increases in the first half of the year of 20% in average revenue per room, largely thanks to the continued spectacular growth of the Gran Meliá Rome – with record rates and double-digit improvements in RevPAR – and the Meliá Milano, where RevPAR grew by 15% thanks to the Universal Exhibition, together with the successful recent opening of the ME Milan il Duca.
As for the United Kingdom, where Meliá opened its first Innside hotel in Manchester in the second quarter of 2015, the market saw an important improvement in RevPAR- of more than 15% at the ME London- despite the slight decline in demand from the rest of Europe due to the Sterling Pound’s appreciation.
Premium hotels in Spain benefited from company strategy in the luxury travel segment with a 10% increase in RevPAR, boosted by the excellent performances of the Gran Meliá Palacio de Isora in Tenerife (with double-digit growth), the Gran Meliá Colón in Seville and the Gran Meliá Don Pepe in Marbella, where RevPAR increased by more than 30%. The Gran Meliá and ME by Meliá hotels in Madrid and Barcelona continue to see double-digit growth in RevPAR, especially in Madrid, and the company is happy to report the successful growth of luxury resorts in the Balearic Islands: Me Mallorca, ME Ibiza and Meliá de Mar.
The notable growth of luxury hotels is mainly due to the growth of direct sales through melia.com and other channels, calculated at 25%, as well as the increasing penetration in large luxury travel networks.
As for the Mediterranean division, RevPAR increased by 7.8% explained by a 95% improvement in prices. The trend seen in the first quarter continued in the Canary Islands, with an 8% increase in RevPAR, and a 12.8% in the Spanish mainland coast hotels, highlighting specific hotels such as the Meliá Atlántico Isla Canela with an increase of 19.9%.
The Balearic Islands saw in May a slight decline in occupancy due to renovation work at several hotels before their rebranding (Sol Beach House Ibiza, Meliá Gavilanes, Sol House Trinidad) and the fall of the less price-sensitive Russian market, although growth has been boosted from July onwards. For the region as a whole, Meliá highlights the recovery of the Spanish market and the recovering strength of the British market which have offset the decline in Russian demand, as well as the spectacular growth of melia.com, which grew between 26 and 30% depending on the destination.
Spanish cities continues on an upward trend, with 12% improvements in RevPAR in the first half of the year, 65% explained by price increases, an improvement distributed evenly amongst the different segments, and with growth of 14% in sales through melia.com.
Madrid (+10.2%) and Seville (+20.2%) recorded the best growth in RevPAR (with a gradual improvement in performance from hotels near Barajas Airport in Madrid), and Barcelona is also recovering its positive trend.
Higher asset valuation
The company also presented the results of a new asset valuation carried out by Jones Lang Lasalle (the last one was carried out in 2011). According to it, the Hotels and Real Estate Assets included in the Meliá Hotels International’s balance sheet, have a market value of 3.555 million euros at June 30th. 2015.
The report describes the increasing quality of company assets, with a 16% growth in the Average room price, now rated at 195.384€, thanks to the improvement of the hotel portfolio over recent years, during which Meliá has maintained a strategic focus on factors such as location, physical condition and brand suitability.
All this strengthens the company’s ability to enhance the qualitative expansion of its portfolio through management contracts, expanding its presence and reputation in the its most important markets.
Corporate Social Responsibility
Throughout the first half of the year, Meliá Hotels International has made significant progress in the responsible management of natural resources, achieving significant success with its “SAVE” internal energy efficiency programme. Specifically, the company has reduced CO2 emissions from hotels by between 7% and 15% thanks to the installation of energy efficient systems and products, and remains committed to the development of projects in hotels in Europe under the ESCO model, which will represent a reduction of about 15% of CO2 emissions.
Sustainable construction isanother priority for the gradual introduction of sustainable standards in Meliá’s business model, as demonstrated by the ME Ibiza, which was completely renovated in 2014 and recognised as one of the best sustainable hotel renovation projects at the ReThink Hotel Awards in 2015.
Moreover, Meliá has just announced the extension of the agreement with Endesa to supply 100% of the electricity used by its hotels and corporate offices in Spain from renewable sources (wind, hydro or solar), and Meliá has joined the “Committed to the Climate” campaign promoted by the Spanish Ministry for the Environment aimed at seeking greater urgency in implementing plans to combat climate change at the next UN Climate Summit in Paris. To date, 102 of its hotels have been awarded a “Greenleader” certificate by TripAdvisor.
With regards to society, Meliá maintains a focus on the protection and promotion of children, and the employability and social integration of people with disabilities. The company retains its partnerships with such prestigious organisations as UNICEF, Prince of Girona Foundation, SERES Foundation, ONCE Foundation, and with universities such as the Rey Juan Carlos I or Balearic Islands University.
Besides, Meliá is actively involved in the project “Together for Employment”, sponsored by Accenture Foundation, which joins forces between Companies, Non-profit organizations and Public Administrations in order to promote employability of young people in risk of social exclusion.
As part of its Social Responsibility policy, Meliá presented its Annual Report & CSR 2014 following the guidelines of the Integrated Reporting Council, which provides a framework for reporting company strategy and its impact on different stakeholders, while also respecting the reporting criteria of the Global Reporting Initiative (GRI-G4).
This strong focus on commitment to society and the environment, together with the financial, labour, sales policy and internationalisation aspects, helped Meliá Hotels International to be named for the third consecutive year as the travel company with best corporate reputation in Spain, achieving 18th position in the MERCO ranking of all Spanish companies from all sectors and industries.
Forecasts for the year
The main indicators for the quarter point towards a new record summer season, especially in the resort hotels in the Canary Islands, the Costa del Sol and Mallorca, where sales already on the books show a significant increase compared to last year. The growth in demand in resorts in these regions is also benefiting from the economic recovery in Spain, and with respect to markets such as the UK and Germany, also from other impacts such as the regrettable attacks in Tunisia and the political situation in Greece. In Mallorca, sales have recovered and are expected to be above 2014, thanks to positive last minute sales, after a somewhat erratic start to the season in some areas.
Growth is also positive in company hotels in major European countries, mainly in Italy and Germany, to which we can also add Paris and London thanks to the recovery of their respective markets. As for city hotels in Spain, it is estimated that the third quarter will see significant growth in sales compared to 2014, except for the month of September, during which there were numerous important events and conferences in 2014.
Looking at the year as a whole, forecasts point to a healthy high single-digit growth in RevPAR, with more than 2/3 explained by price increase.